Iowa beverage makers sue state over rules for new hemp law

[cigaretteman]

• Two Iowa companies are suing the state over its interpretation of a new law that restricts THC levels in adult beverages.
• Climbing Kites and Field Day Brewing Co. have asked a federal court for an immediate injunction to stop the state from enforcing the new THC limits.
• Retailers in Iowa will be required, as of July 1, to return or destroy any beverages, edibles, and other products that do not comply with the new rules limiting the strength of consumable hemp products.
• The companies say the new regulations will wipe out 80% of their inventory.

Two Iowa beverage producers are seeking an injunction to prevent state health officials from enforcing a new law that limits the potency of consumable hemp products like theirs, saying administrative rules would wipe out 80 percent of their inventory.



Under the new state law, Iowa retailers will have to send back or destroy existing beverages, edibles and other products starting July 1 that do not meet new regulations.


Faced with the proliferation of hemp-derived THC products, state lawmakers passed and Gov. Kim Reynolds in May signed into law House File 2605. The law caps the amount of tetrahydrocannabinol, or THC — the psychoactive substance in cannabis that causes a high — in consumable hemp products sold in Iowa at 4 milligrams per serving and 10 milligrams per package or container.




Many — if not most — products on the shelves in stores now exceed those limits. Roughly 1,100 Iowa retailers are licensed to sell consumable hemp products in the state supplied to them by more than 100 manufacturers.

Consumable hemp and other products are for sale March 5 at Central Iowa Vapors in Des Moines. (Nick Rohlman/The Gazette)
Climbing Kites, a beverage manufacturer headquartered in Des Moines, and Field Day Brewing Co., a North Liberty producer of the “Day Dreamers” line of cannabis-infused sparkling water, filed a lawsuit Monday in U.S. District against the Iowa Department of Health and Human Services.


The companies are seeking an immediate injunction against enforcing the new THC limits, as well as an order declaring state health department officials acted beyond their authority when defining potency limits for hemp products.




Download: Climbing Kites lawsuit.pdf


The department, which says it does not comment on pending litigation, hadn’t filed a response to the lawsuit in court as of Wednesday morning.





The lawsuit asserts the new regulations would wipe out most of the companies’ inventory. It states the department’s guidance is unlawful and wrongly interprets the THC potency limits of the legislation.


The companies also argue the law violates the Supremacy Clause of the U.S. Constitution “because it attempts to regulate matters exclusively reserve to the federal government,” noting Congress authorized the U.S. Food and Drug Administration to oversee food safety.

Lawmakers cite lack of regulation​

Consumable hemp products were legalized in the 2018 federal farm bill and later the following year through the Iowa Hemp Act.


In 2020, state lawmakers passed a second hemp bill formally establishing the state’s consumable hemp program. The law allows for the production, distribution and sale of hemp products that contain 0.3 percent or less THC by weight.


The laws were intended to address sales of non-intoxicating compounds like cannabidiol, but they also legalized the sale of hemp-derived THC products that have a similar psychoactive effect to traditional marijuana.


Recreational marijuana is not legal in Iowa, though the consumable hemp program has allowed registered retailers and manufacturers to sell non-inhalable products made from hemp without restrictions on potency.


Iowa's majority Republican lawmakers said the new bill was needed because the industry had little regulation — including no legal age limit for purchase, no cap on THC potency and no uniform standards for packaging or labeling — and they did not intend to legalize intoxicating products when they passed the Iowa Hemp Act.


The state law bans the sale and consumption of any hemp products to people under 21, requires hemp products to have a warning label and bans the sale of synthetic THC.

Iowa beverage makers sue state over rules for new hemp law

Climbing Kites, a beverage manufacturer headquartered in Des Moines, and Field Day Brewing Co., a North Liberty producer of the “Day Dreamers” line of cannabis-infused sparkling water, filed a lawsuit Monday in U.S. District against the Iowa Department of Health and Human Services.

www.thegazette.com

 

[cigaretteman]

State drafts rules for enforcement​

The Iowa Department of Health and Human Services issued updated guidance and details on how the state plans to enforce the new regulations after brewers of THC-infused beverages complained initial rules misinterpreted the law.


The law itself does not define the size of a “serving” or “can.”


Big Grove Brewery, the majority owner of Climbing Kites, initially did not object to the changes, believing the law would not affect the company’s drink line. All of the THC-infused drinks produced by Climbing Kites, which are sold by Lua Brewing and Big Grove Brewery, are 12-ounce cans ranging in potency from 2.5 mg to 10 mg THC.


Filed Day Brewing offers beverages containing 2, 7 and 15 mg of THC per can.


Climbing Kites officials felt the law would allow much of the status quo to continue for its line of hemp-based non-alcoholic seltzers, and simply would need a change in labeling to comply with the new regulations. For its 10-mg can, the producer believed it could change the number of serving sizes in each can to accommodate the law’s cap of 4 mgs of THC per serving.


Health and Human Services, however, initially interpreted the law to mean that manufacturers could have only 4 milligrams total THC per can. Big Grove said that interpretation threatened to wipe out a large percentage of its inventory and product line, and said it would consider legal action if a resolution was not reached.


State health officials now have issued revised proposed administrative rules saying a container is defined as an object holding "one or more servings of a consumable hemp product." That means a 12-fluid-ounce drink could contain 4 mg of THC. Any drink with a higher potency would have to be in a larger can, and drinks could not be smaller than 12 fluid ounces. Any beverage or product containing more than one serving per container must be "conspicuously labeled."

Producers: Rules would severely cut THC drink lines​

The companies argue the limit conflicts with the statute that says a consumable hemp product may contain up to 10 milligrams of THC per container.


The lawsuit claims approximately 80 percent of their current inventory and products accounting for about 85 percent of their revenue will become illegal because of the department’s interpretation of the potency limits.


Any THC products that don't meet the new requirements should be destroyed before the law takes effect July 1, Health and Human Services told retailers in a memo, and will be considered controlled substances going forward.


Sellers are not allowed to repackage or relabel existing products, and should either speak to vendors to see about returning non-conforming products or destroying them with local law enforcement, according to the memo. Retailers cannot store or warehouse non-conforming products, according to the department.


And there will be no “grace period” for on-hand products not meeting the new limits, according to guidance provided to retailers. The department notes penalties may range from a serious misdemeanor to a Class B felony, depending on the amount of product.


Climbing Kites co-founder and general counsel Scott Selix told The Gazette the company will not destroy any of it products.


“We don’t plan to make larger cans. And we don’t plan to make any special (product line) to fund the lawsuit,” Selix said.


Virtual public hearings on the new regulations are planned for 3-4 p.m. July 2 and 10-11 a.m. July 8. Rules are set to be adopted "no earlier than July 17," with final rules published Aug. 7.


Other serving sizes under the draft rules include:

What products are prohibited for sale in Iowa​

Starting July 1 under the new law, the following are prohibited:

• Hemp products containing more than 4 mgs total THC per serving and more than 10 mgs of THC per container
• Synthetic consumable hemp products in any form
• “Flower” or “raw bud” consumable hemp products

A person or business found selling or distributing the products to anyone under 21 may be found guilty of a simple misdemeanor. The law also mandates civil penalties and “unpaid community service” for people under 21 who consume or possess it.


A retailer that still possesses hemp products that do not meet the law's requirements could face penalties from a serious misdemeanor to a Class B felony.


Selling the products without a registration could lead to civil penalties of up to $10,000 per day, with the possibility of additional criminal penalties.


Additionally, Health and Human Services may confiscate or order the disposal of any non-conforming hemp product sold by a person not registered with the state.